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More royalties for songwriters?

Us_copyright_office_logo In an overlooked notice of proposed rulemaking last week, The Library of Congress' Copyright Office lived up to the worst fears about government agencies. It took up a nearly eight-year-old petition and, rather than settling a current dispute, created a new one. It also provided yet more evidence that copyright laws written in the analog era don't map well to the Internet and digital technologies.

The issue has a rich back story, much of it laid out in the notice. But here's a distillation. The Copyright Office was asked in late 2000 to resolve a disagreement between the RIAA and music publishers over how large a mechanical royalty, if any, should apply to two types of music services: on-demand streams from an online jukebox, and "tethered" downloads that expire after a certain number of days or plays. Such streams and downloads are at the heart of subscription music services such as Napster and Rhapsody. In its proposed rulemaking Wednesday, the Copyright Office basically punted on that question. But it unexpectedly held that music publishers were entitled to an additional royalty for non-interactive streams -- e.g., webcasts, satellite services and digital over-the-air radio signals. The size of the royalty was left to a three-person arbitration panel, which has been considering the rates for interactive streams but, apparently, not for non-interactive ones.

Representatives of the music publishers were still digesting the decision when I talked to them Friday, so it's not clear how they'll respond. Nor is it possible to say what impact, if any, there would be on webcasters already struggling to pay royalties to the labels. “This is more than we have ever asked for," said Laurie Jakobsen, senior director of communications for the Harry Fox Agency (a royalty collector for the publishers). Added Jay Rosenthal, general counsel for the National Music Publishers Assn., "We're still reviewing the rulemaking documents, but so far we're optimistic."

What's perverse about the notice is that the RIAA and the music publishers settled their dispute over DPDs back in 2001. The two sides agreed that mechanical royalties were due on-demand streams, but not on non-interactive ones. That's more than fair, considering where mechanical royalties fit into the big picture. Mechanicals were designed to compensate songwriters when someone makes a copy of one of their songs, typically by recording it on an album (and then making multiple copies for sale). DPDs expand the notion of mechanical royalties to make sure they apply to situations where the product isn't necessarily physical -- for example, when you download a 99-cent single from iTunes, or buy a hard drive preloaded with the collected works of Megadeath (perfect for the car!). Streaming, on the other hand, impinges more on songwriters' public-performance rights. It's the digital equivalent of listening to the radio, not buying a CD.

Granted, webcasters and on-demand streaming outlets have to copy songs into their computers, which impinges on the songwriters' mechanical rights. But that doesn't mean the streams sent to listeners amount to DPDs. The Copyright Office contended that not only does the stream amount to a DPD, so do the buffer copies created along the way. As attorney David Oxenford noted on his blog, it defies logic to suggest that online radio listeners could pluck pieces of a streamed song out of the RAM buffer on their computers.

The argument against imposing mechanical royalties on streams isn't an argument against paying songwriters. It's an argument against paying them twice for a single use of their works. A federal judge  in White Plains, NY, ruled  this year that RealNetworks, Yahoo and AOL owed ASCAP performance royalties for their streaming services, and he set the rate at 2.5% of their music-related revenue. Last year, however, the same judge ruled that downloads weren't public performances, meaning that only mechanical royalties would apply to sales from iTunes and other online music stores. Too bad the same kind of logic didn't inform the Copyright Office, which applied the language of the 1995 law rigorously but not realistically.

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Times editorial writer Jon Healey pens opinion pieces about a variety of business issues, and blogs about technologies that are changing the entertainment industry's business model.

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